While it is a crucially important part of managing your personal finances, not many people devote enough time to estate planning. Essentially, estate planning is deciding who will inherit your assets after you’re gone. This means that if you don’t have estate planning done, you can’t choose who gets everything that you worked so hard for.
It is easy to pass off estate planning as an activity only for the rich, or at least those who have something to pass down. However, it is good to understand that without proper planning in place, settling your affairs after you go could have a long-lasting—and costly—impact on your loved ones, even if you think you do not have much to pass on.
Today, we’re looking at 4 reasons why you should get your estate planning in order, and how it can help you avoid potentially devastating consequences for your loved ones.
1. An Estate Plan Protects Your Beneficiaries
Estate planning should be for everyone looking to protect their future generations; the need to plan for when something happens to a family’s breadwinner (or breadwinners). After all, you don’t have to be super-rich to do well in the stock market or real estate, both of which produce assets that you’ll want to pass on to your heirs.
Even if you’re only leaving behind a second home, if you don’t decide who receives the property when you pass away you won’t have any control over what happens to it.
That’s because the main component of estate planning is designating heirs for your assets, whether it’s a house or a stock portfolio. Without an estate plan, the courts will often decide who gets your assets, a process that can take years, rack up fees, and gets ugly. After all, a court doesn’t know which sibling has been responsible and which one shouldn’t have free access to cash. Nor will the courts automatically rule that the surviving spouse gets everything.
Key takeaway: If you die without a will, which is a vital part of an estate plan, the courts will decide who gets your assets according to Malaysia’s estate laws.
2. An Estate Plan Protects Young Children
Nobody thinks of dying young, but if you’re the parent of small children, you need to prepare for the unthinkable. This is where the will portion of an estate plan comes in.
To ensure that your children are cared for in a manner of which you approve, you’ll want to name their guardians in the event that both parents die before the kids turn 18. Without a will that names these guardians, the courts will step in to decide who will raise your children.
3. Estate Planning Protects You Too
Estate planning doesn't just come in handy once you're dead. It can also include a durable power of attorney and healthcare proxy – two important legal documents that ensure your wishes will be carried out if you're temporarily or permanently incapable of handling them.
A durable power of attorney appoints a trusted relative or friend to manage your legal and financial affairs if you can't manage them independently. A healthcare proxy gives someone permission to make healthcare decisions for you if you can't communicate with them yourself.
Without these directives, also known as a "living will," it could get complicated determining who among your loved ones is in charge and is legally allowed to take action. In the worst-case scenario, someone the court appoints or a hospital staffer unfamiliar with your wishes may wind up making decisions for you.
4. An Estate Plan Reduces Family Squabbles
We’ve all heard the horror stories. Someone with money dies and the war between family members begins. One sibling may think they deserve more than another, or one sibling may think they should be in charge of the finances even though they're notorious for racking up debt. Such squabbling can get ugly and end up in court, with family members pitted against one another.
Stopping fights before they start is yet another reason why an estate plan is necessary. This will enable you to choose who controls your finances and assets if you become mentally incapacitated or after you die and will go a long way toward quelling any family strife and ensuring that your assets are handled in the way that you intended.
It also will help you make individualized plans if the need arises. This helps you to arrange for a child with health problems or to set up a trust for one who might be better off not inheriting a lump sum. It can also help you give more to the child who did most of the work of caring for you in your later years or less to the one whose extensive education you funded while paying far less for their siblings.
Deciding whether to divide your estate exactly equally is one of the key tasks you need to think through.
If you want your assets and your loved ones protected when you can no longer do it, you will need an estate plan. Without one, you may not have control over how you want to pass down your possessions to your family, or have that decision made on your behalf, even if it isn’t what you were originally planning for.
Another good thing to keep note of is that you should review your plan regularly and keep it up to date with your notable life changes, like marriage or death in the family. It’s better to start your estate planning sooner, rather than later. However, you should also keep in mind that an estate plan is only effective if you keep it current.
We hope you enjoyed the article.
At SK i-Wealth, we offer a full financial service solution for individuals and companies, including retirement planning services. Our firm’s comprehensive wealth platform and experience supports a team of Financial Integrators with the resources they need to deliver integrated financial solutions according to your needs.